Paschal Donohue spoke at the Economic and Social Research and Institute on Tuesday.

Paschal Donohoe said average annual earnings grew by 2% last year, compared to 1.3% in 2016 (Niall Carson/PA)

A sustainable and affordable pace of wage growth will protect Ireland’s competitiveness as the country faces stern outside challenges, the Finance Minister has said.

Paschal Donohoe said the labour share – the proportion of the national income paid to workers – is now “broadly back” in line with its share during the Celtic Tiger years, adding that it is likely to increase over the coming years.

Speaking at the Economic and Social Research and Institute (ESRI) on Tuesday, Mr Donohoe said average annual earnings grew by 2% last year, compared to 1.3% in 2016.

“We expect this upward trend to continue as the labour market reaches full employment,” he said.

He added that everyone has a shared responsibility to ensure the pace of wage growth is “sustainable and affordable”.

He continued: “The other area where progress is imperative is in housing.

“From a very low base and after a lost decade of starved investment, there are signs of progress.”

New research by ESRI shows that income growth in Ireland is evenly distributed with income inequality broadly stable.

Professor Tim Callan said: “The welfare and tax systems have played a key role in shaping these outcomes.

Opening speech to the @ESRIDublin Budget Perspectives Conference here. Focus on affordable and incremental but real and sustainable spending which will allow us to build on the progress we have made in recent years https://t.co/ZRPd0Xmgke